One distinction every coin collector eventually learns is the difference between a proof coin and an uncirculated coin. It’s often difficult to tell a proof coin from an uncirculated coin, but there are a few differences between the two concerning value and collectability.
The difference between a proof coin and an uncirculated coin is that the proof coin is made differently at the minting stage and an uncirculated coin is produced in much higher quantities than a proof coin. Both realities affect the value of each as well as their circulation among collectors.
The differences between a proof coin and an uncirculated coin are straightforward, until a discussion of value is brought up. That’s when it becomes murkier. Read on to learn more about the differences and how they affect the availability and value of proof and uncirculated coins.
A Primer On Coins
Most people think a coin is a coin is a coin. They think that a quarter is the same, from year to year, with occasional special imprints (like their state’s quarters), but even those are all the same within the same year. That is not the case.
The reality is that there are different types of coins that are minted differently from one another but have specific purposes. At the very least, the minting process produces varying finishes from coin type to coin type based on the type of strike that is used.
Each type of minting has different meanings to dealers and collectors. Some coins are worth more from the beginning because of how they are minted. Others are not worth less than the face-value of the coin, but mass produced and thus hold and grow value much more slowly.
When the average person uses the word “uncirculated,” they are likely referring to one of these possibilities:
- A coin withheld from general circulation because of an error
- A coin withheld from general circulation for collection purposes
- A coin withheld from general circulation in reserve, for use if needed
From a coin collector or dealer’s perspective the word uncirculated can mean one of three things:
- A coin that is selectively released and withheld from general circulation
- A coin that has an official grade of “Mint State 60+”
- The minting process that produces the coin
As you can see, the two sets of definitions have similarities, but are also profoundly different. The key difference is the intent of the coins and the reference to the minting process.
The Uncirculated Definition That Fits Here
For this article, the most appropriate definition is the third bullet point from the collector or dealer’s perspective. That is the minting process that signifies an uncirculated coin.
To understand the difference between a proof coin and an uncirculated coin, it pays to know two additional definitions that help differentiate a proof from an uncirculated coin. Those definitions are “bullion” and “general circulation.”
Bullion means a quantity of precious metals that are in bulk form. The official definition is that bullion is a non-ferrous metal that has been refined as pure as possible. The two metals most often sold in bullion, for minting coins and other purposes, are gold and silver.
Origin Of The Word
The word bullion is derived from the French, and before that, the Anglo-Normans used it, and it refers to “boiling.” That refers to the process of melting metals to extract impurities to create the purest metal possible.
From a coin collecting perspective, bullion simply means the purest metals on the market that meet the quality threshold established by the US government for minted coins. Think of it as the precious metal equivalent to “buying in bulk.” The key difference between the two is that when a shopper buys in bulk, they usually get a discount!
With precious metals, the price stays the same in terms of the weight of the purchase at the time of sale. There is no discount for buying more. In fact, the value of a bullion purchase can rise and fall depending on market influences.
Precious metals are bought and sold based on weight and the price per weight. This fluctuates constantly, based on general market prices. General market prices can be influenced by several things. Here are a few:
- The strength of the US dollar
- The strength of the US economy
- The strength of the world economy
- Demand for a stable investment
At its core, each of these factors create a supply and demand influence where the more unstable the dollar and both economies are, the greater the demand by consumers for a stable investment. Gold and silver are considered stable investments because of their rarity and have been for just about all of human history.
For production, purchasing bullion in bulk makes sense because of the amount of coin production the US government engages in each year. The alternative would be to order bullion as it was needed, which could mean the prices for gold and/or silver would skyrocket.
Bullion allows the government to purchase precious metals in bulk at lower prices as a hedge against rising precious metal prices in the future.
The US Mint produces “bullion coins,” which are valued by the “weight of the precious metal.” That price fluctuates. Because the price is transparent, however, bullion coins are easy to price and purchase. They are great for new coin collectors.
Bullion coins are struck in the minting process only once. That means the coin’s design is pressed into the metal one time. Other types of coins (like proof coins) are struck multiple times. Additionally, no special effort is made to buff or polish a bullion coin and they are not usually sold in plastic sleeves.
Many reasons justify purchasing bullion coins:
- The pricing is easy to understand and quantify
- A bullion coin functions more like a commodity than a precious metal
- They are acknowledged hedges against economic turmoil and civil upheaval
Bullion coins are not circulated to the general public but are sold to dealers. A dealer can be a solitary entity or an organization. Often, the coins sold on television are some iteration of a bullion-based coin. Bullion coins popular with the public include Gold American Eagles, Gold American Buffalos and Canadian Gold Maple Leaf coins.
General Circulation Coins
The coins you use to purchase things are general circulation coins. These are the most prolific coins, in terms of both production and circulation. The goal of the minting process is to produce general circulation coins as quickly and with as little effort as is possible. This ensures a robust supply of coins for circulation and helps control production costs.
General circulation coins are usually not made of any precious metal, although some have been, most notably silver quarters, throughout American history. General circulation coins can commemorate a historical event or person but have not normally done so.
The Minting Process
The minting process for bullion, general circulation, proof and uncirculated coins is unique for each type of coin, but there are some similarities. The most attention is paid to proof coins and the least amount of attention is paid to general circulation coins. The other two are given attention, but not nearly as much as a proof coin.
To mint the coins, sheets of raw materials that can weigh multiple tons are cut into blanks. The blanks are softened by heating them and they are then washed and molded by creation of a ridge. The ridge helps protect the image on the coin. Finally, the image on the stamp is put on them. After that, the coin type dictates how it is handled.
Coins destined for collectors and dealers are kept separate from general circulation coins. General circulation coins are sent to the US Treasury or stored at the mint where each denomination was stamped. Coins that receive specialized stamping and care are handled separately from all other coins, including storage and distribution.
Why It Matters
The reason knowing how each classification of coin is handled is important is because it will highlight the key differences between proof coins, uncirculated coins, and all the rest. Understanding those differences is key to fully appreciating the special qualities of proof and uncirculated coins as well as being able to assess their value fairly and accurately.
For example, if you do not know the difference between a proof coin and an uncirculated one, you may not realize why one is more valuable than the other. You also may not realize that uncirculated coins can fluctuate in price because of how they are valued. Knowing the difference can ensure you get a great price and save you money.
In the production process, uncirculated coins come from the same sheets of precious metal as proof coins, but that’s where the similarities end. A proof coin is treated with kit gloves from start to finish, while an uncirculated coin is treated with slightly less care.
Initially, proof coins are cleaned and hand polished as blanks. This ensures a high-quality finish and strike. The blanks are struck twice by the same die, which is also specially polished. This ensures the stamp is deep and clear. The importance of that is that a deeper, clearer imprint makes the coin more durable.
Those two qualities enhance value but also ensure the stamp design will last a very long time if the coin is cared for properly. Both also make the coin stand out, much more so than bullion or uncirculated coins or those in general circulation.
The reason for two strikes is that doing so creates proof coins’ signature characteristic. This is the mirror-like shine in the background of the coin and the matte finish in the foreground.
After it has been struck, a proof coin is issued a Certificate of Authenticity that verifies that it is a proof coin. This is important as proof coins typically have a higher value than uncirculated, bullion, and circulated coins. The coins are then specially encapsulated and put up for sale.
Originally, proof coins weren’t just for circulation among coin collectors. The first US proof coins were struck in 1817. The purpose of the coin was to allow the image to be scrutinized and be rendered as “perfect” for minting thousands of coins.
Today, a proof coin is produced solely for the purpose of collecting. In addition to having their signature shiny background and foreground matte finish from being struck, proof coins are also hand polished and buffed. Once the polishing has passed quality assurance inspections, the proof coin is put into protective packaging.
As mentioned, the background of a proof coin is shiny and highly reflective. It is so reflective that in some cases you can see your own reflection when looking at it. The sheen and reflection are two of the most compelling aspects of proof coins.
Rarity Of Proof Coins
Because proof coins are of the smallest number of coins minted in any run, there are a lot more of all the other coins. This makes the proof coin a rare collector’s item. This rarity increases their value both in terms of monetary worth and general appeal.
Why Collect Proof Coins?
Collectors looking to collect coins known for their beauty and rarity will gravitate towards proof coins. Proof coins tend to be expensive, though, so the collector should be prepared to pay significantly more than they would pay for an uncirculated or bullion coin.
Uncirculated coins are not available to the public in mass quantities, but anyone can purchase one. They are specially cleaned, which creates a shine that bullion and general circulation coins do not have. Uncirculated coins are kept out of circulation but are popular with collectors that want a more authentic looking coin.
While proof coins are struck twice, uncirculated coins are struck once. This is also how circulated coins are produced. An uncirculated coin can experience damage during the production process from being hit by other coins or damaged in machinery.
Once minted, uncirculated coins are stored in protective packaging. The coins are then sent to dealers who have placed orders. They can also be purchased by dealers who do not have a pre-order. Coins that are not ordered by dealers are stored at the mint they were produced in.
Value Of Uncirculated Coins
Uncirculated coins are the same denomination as many coins in circulation. Nonetheless, an uncirculated coin is worth more than one that is in general circulation. The reason for this is that while the uncirculated coin may be damaged in the minting process, it will not generally be exposed to as much as a circulated coin.
For instance, it will not:
- Be exposed to dirt, grime, moisture or germs
- Be dropped in random places and environments
- Be used for non-coin related activities, like scratching off lotto tickets
- Be handled by thousands of complete strangers
That makes an uncirculated coin worth much more than a circulated coin, even if the circulated coin is in decent condition.
Rarity Of Uncirculated Coins
Uncirculated coins are not as rare as proof or other special edition coins but are rarer than circulated coins. This makes them more valuable on average than coins in circulation. However, because more uncirculated coins are minted than proof coins, they are usually worth less.
One aspect that plays into the rarity argument, even though they might not be that rare, is the fact that a collector or dealer must try to purchase one. An uncirculated coin requires more effort to find and collect than a random find in dealer’s shop or, even more random, getting one back as change from a purchase.
This adds some value because while the coin may not be as rare as a proof coin, the same effort on the part of the collector must be made.
Why Collect Uncirculated Coins?
Uncirculated coins are not as rare as proof coins and often can have slight damage, such as dings and scratches. This will make them less valuable than your average proof coin. Uncirculated coins are also usually made of bullion, so their price can fluctuate based on precious metals market prices.
Nonetheless, uncirculated coins are a great way to get into coin collecting. They possess a certain special quality because they are not in regular circulation, but not so much that they are unaffordable, which proof coins can be.
Another benefit of collecting uncirculated coins is that they maintain their value over time. If they are properly maintained, an uncirculated coin will hold up well over time in virtually any environment, ignoring the fluctuating price of the metal itself.
The difference between proof coins and uncirculated coins is that proof coins are minted in a different way. Uncirculated coins are also minted in much larger quantities than proof coins. Both have different values to collectors depending on the coin itself and various other factors.